TaxTMI 
TaxTMI 
2014 (1) TMI 1757
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.... surmises there bring no finding to this effect in any of the orders passed by the authorities below. 3. Because the action of the CIT(A) in upholding the order of the Assessing Officer passed against the application u/s 154 is unjust, unwarranted and be quashed. 4. Because on a proper appraisal of facts and circumstances of the case, the claim of set off of long term brought forward capital losses determined in A.Y. 2002-03 be directed to be allowed and set off against the long term capital gains for the year under consideration. 5. Because the CIT(A) has failed to appreciate that the issue regarding set off capital loss brought forward from the earlier years is part and parcel of the computation of capital gains for the year (i.e. subject matter of appeal) and as such in order to determine the correct liability of capital gains, the loss brought forward from earlier years is to be set off against the capital gains computation for the year under consideration. 6. Because the CIT(A) has misinterpreted the provisions of law and has arbitrarily held that the order sought to be rectified is not the "order concerned" overlooking the well settled law ....
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....ght of report of the D.V.O. at Rs. 13,19,962/-. Having noted that the Assessing Officer has re-computed the capital gain as per the directions of the Tribunal, the CIT(A) dismissed the appeal of the assessee being infructuous as the proper compliance of the directions of the Tribunal has been made in order dated 25/01/2011. 3.1 Thereafter, the assessee has moved an application u/s 154 of the Act against the order dated 25/01/2011 before the Assessing Officer with the submission that the carry forward capital loss of Rs. 12,49,310/-relating to assessment year 2002-03 has been missed/left by the Assessing Officer while computing long term capital gain, therefore, the set off of the same be allowed against the capital gain for the impugned assessment year. The Assessing Officer has denied the rectification on the ground that the set off of carry forward capital loss was denied in the original assessment passed on 31/03/2006, therefore, the rectification after a period of 4 years is not permissible. 3.2 The assessee preferred an appeal before the CIT(A) with the submission that the order dated 25/01/2011 has been merged with the original assessment order dated 31/03/2006, therefo....
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.... the AO to give effect to the directions of the Hon'ble ITAT. The appellant has placed reliance on the judgment of the Hon'ble Apex Court in the case of Hind Wire Industries Ltd. v. CIT [1995] 212 ITR 639 and that of Hon'ble Delhi High Court in the case of CIT v. Tony Electronics Ltd. [2010] 320 ITR 378. I have gone through these judgments and find that the facts in the present case are different. In this case both the subsequent orders passed on 31.12.2009 and 25.01.2011 are consequential orders passed to give effect to the directions of the Hon'ble ITAT and not rectificatory orders. The mistake of not allowing set off of loss has occurred in the original order which was passed u/s 143(3) on 31.03.2006. Since, the issue of set off of loss was not dealt with in the subsequent consequential orders hence none of these orders got substituted for the original order on this issue. It may be mentioned that the doctrine of merger would not apply in this case as the consequential assessment proceedings taken up as per directions of the Hon'ble ITAT has nothing to do with set off of losses. The doctrine of merger applies only in respect of such items which are the subjec....
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....-9-1999. Thus, none of the intervening orders got substituted for the original order on that issue. Hence, as per the clear mandate of section 154(7), rectification being sought by the revenue was beyond four years from the date of the original order. Therefore, the Commissioner (Appeals) was correct in holding the impugned rectification order as invalid, being time-barred. Thus, the appeal of the revenue was to be dismissed." The Hon'ble Apex Court in the case of CIT v. Alagendran Finance Ltd. [2007] 162 Taxman 465 (SC) has held that "A bare perusal of the order passed by the Commissioner would clearly demonstrate that only that part of order of assessment which related to lease equalization fund was found to be prejudicial to the interest of the revenue. The proceedings for reassessment had nothing to do with the said head of income. Doctrine of merger, therefore, would not apply in the instant case. [Para 7] Furthermore, Explanation (c) appended to sub-section (1) of section 263 is clear and unambiguous as in terms thereof doctrine of merger applies only in respect of such items which are the subject-matter of appeal and not which are not. [Para 8] There may not ....
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....r section 263, the Commissioner had stated that for the assessment year 2000-01 it was seen that the assessee had filed return of income on 30-11-2000 admitting nil income, that the assessment was subsequently completed under section 143(3) assessing the income for the year at Rs. 11,21,82,188/- that while completing the assessment, the Assessing Officer had among other things disallowed deduction under section 80-IA relating to water treatment projects, that a sum of Rs. 3,14,46,497/-being the profit on water supply project had been allowed as deduction under section 80-IA, that was subsequently modified vide order under section 154, dated 14-6-2003 and the deduction under section 80-IA had been restricted to Rs. 2,89,93,730/-. It was further stated that the nature of work done by the assessee in respect of the projects was only that of a contractor and at no point of time the project was owned by the assessee that factum has been admitted by the assessee in letter dated 24-3-2003. The reason shown in the show cause notice manifests that what was sought to be revised was the assessment order and not the rectification order passed because the rectification order was passed for the ....
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....d 25/01/2011 of the Assessing Officer was passed in remand proceedings consequent to the order/direction of the CIT, therefore, order dated 25/01/2011 cannot merge with the original assessment order dated 31/03/2006. He has also invited our attention to the facts of the case laws referred to by the assessee with the submission that in the case of Hind Wire Industries Ltd. (supra), the Hon'ble Apex Court has given a finding with reference to an order passed u/s 154 of the Act rectifying the original order. The Hon'ble Apex Court has held that once the original order is rectified u/s 154 of the Act, the original order merges with the rectified order. In the case of Tony Electronics Ltd. (supra), their Lordships of Hon'ble Apex Court having relied upon the order of Hind Wire Industries, have held that once appeal against the order passed by an authority is preferred and decided by the Appellate Authorities, the order of the lower authority merges with the order of the Appellate Authority. In both the situation, the limitation would start from the date of the rectified order and order of the Appellate Authority. But in the instant case, order dated 25/01/2011 was neither a ....
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....round that rectification is barred by time as it was filed after a period of four years from the date of original assessment passed on 21st September 1979. In that case, the controversy was raised whether the limitation would start for the purpose of section 154 of the Act from the date of original assessment order or the date of rectified order passed u/s 154 of the Act. In that situation, the Hon'ble Apex Court has categorically held that the original assessment order has been merged with the rectified order, therefore, any rectification if called for, that would be called in the rectified order and limitation would start from the date of rectified order passed u/s 154 of the Act. 6.1 In the case of Tony Electronics Ltd. (supra) the Hon'ble Delhi High Court has again examined the theory of doctrine of merger and has held that the original assessment order would merge with the order of the Appellate Authority and the limitation for the purpose of sub-section (7) of section 154 of the Act was to be counted from the date of the order of the Appellate Authority. With respect to the above proposition of law, we are of the view that there is no dispute about it. When the ori....
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....order passed by the CIT would clearly demonstrate that only that part of order of assessment which related to lease equalization fund was found to be prejudicial to the interest of the Revenue. The proceedings for reassessment have nothing to do with the said head of income. Doctrine of merger, therefore, would not apply in a case of this nature. 8. Furthermore, Expln. (c) appended to sub-s. (1) of s. 263 of the Act is clear and unambiguous as in terms thereof doctrine of merger applies only in respect of such items which were the subject matter of appeal and not which were not. The question came up for consideration before this Court in CIT v. Sun Engineering Works (P) Ltd. [1992] 198 ITR 297 (SC). Therein the assessee raised a contention that once jurisdiction under s. 147 of the Act is invoked, the whole assessment proceeding became reopened, which was negatived by the Court opining : "Sec. 147, which is subject to s. 148, divides cases of income escaping assessment into two clauses i.e. viz. (a) those due to the non-submission of return of income or non-disclosure of true and full facts and (b) other instances. Explanation 1 defines as to what constitutes escape of ....
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.... 9. We may at this juncture also notice the decision of this Court in Hind Wire Industries Ltd. (supra) wherein the decision of this Court in V. Jaganmohan Rao v. CIT & EPT [1970] 75 ITR 373 (SC) interpreting the provisions of s. 34 of the (1922) Act was reproduced which reads as under : "Sec. 34 in terms states that once the ITO decides to reopen the assessment, he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under s. 22(2) and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under sub-s. (2) of s. 22, the previous underassessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under s. 34(1)(b), the ITO had not only the jurisdiction, but it was his duty to levy tax on the entire income that had escaped assessment during that year." 10. There may not be any doubt or dispute that once an order of assessment is reopened, the previous underassessment will be held to be set aside and the whole proceedi....
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.... fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-s. (2) of s. 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the CIT beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity. 6.3 In the light of the proposition laid down by Hon'ble Apex Court and various High Court through aforesaid judicial pronouncement, we are of the considered view that the limitation from the latest order would start only on those cases where the original order merges with the subsequent order. As per the aforesaid judicial pronouncement, the doctrine of merger would apply in two type of cases; (1) where the original order is rectified u/s 154 of the Act and the (2) where the original order is modified by the order of the Appellate Authority. In such type of cases where the original order is merged with the subsequent order, the period of limitation for the purpose of section 154 of the Act would start from the latest order either passed u/s 154 of the Act or by ....